SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE
- --- SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD
ENDED SEPTEMBER 30, 1994.
------------------
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE
- --- SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD
FROM TO
------------------------ -----------------------.
Commission File No. 0-1093
KAMAN CORPORATION
(Exact Name of Registrant)
Connecticut 06-0613548
(State of Incorporation) (I.R.S. Employer Identification No.)
Blue Hills Avenue
Bloomfield, Connecticut 06002
(Address of Principal Executive Offices)
Registrant's telephone number, including area code: (203)243-7100
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes x No
-- --
Indicate the number of shares outstanding of each of the issuer's
classes of common stock as of October 31, 1994:
Class A Common 17,514,679
Class B Common 667,814
Page 1 of 13 Pages
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets(In thousands)
September 30, December 31,
Assets 1994 1993
------ -------------- -------------
Current assets:
Cash and cash equivalents $ 1,536 $ 3,845
Accounts receivable (net of
allowance for doubtful
accounts of $1,746 in
1994, $1,576 in 1993) 155,860 165,615
Inventories:
Raw materials $ 11,692 $ 10,715
Work-in-process 61,079 28,241
Finished goods 1,533 1,131
Merchandise for resale 101,591 175,895 90,364 130,451
------ ------
Other current assets 18,277 16,690
------- -------
Total current assets 351,568 316,601
Property, plant & equip., at cost 182,595 175,770
Less accumulated depreciation
and amortization 102,104 94,059
------ -------
Net property, plant & equipment 80,491 81,711
Other assets 40,375 41,884
------- --------
$472,434 $440,196
======== ========
Liabilities and Shareholders' Equity
------------------------------------
Current liabilities:
Notes payable $ 46,295 $ 31,865
Accounts payable 49,727 51,246
Accrued liabilities 33,849 28,586
Other current liabilities 63,025 55,068
------ -------
Total current liabilities 192,896 166,765
Deferred credits 7,694 7,141
Long-term debt, excl. current portion 37,691 37,977
Shareholders' equity:
Series 2 preferred stock $ 57,167 $ 57,167
Other shareholders' equity 176,986 234,153 171,146 228,313
-------- ------- -------- -------
$472,434 $440,196
======== ========
- 2 -
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 1. Financial Statements, continued:
Condensed Consolidated Statements of Earnings
(In thousands except per share amounts)
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
-------------------- -------------------
1994 1993 1994 1993
---- ---- ---- ----
Revenues $ 199,249 $202,964 $606,186 $595,808
Costs and expenses:
Cost of sales 147,066 153,643 448,618 440,365
Selling, general and
administrative expense 43,529 41,916 131,934 129,288
Interest expense 1,178 2,027 3,100 5,775
Restructuring and
other costs - 69,500 - 69,500
Other expense 41 147 546 314
-------- -------- -------- -------
191,814 267,233 584,198 645,242
-------- -------- -------- -------
Earnings(loss)before
income taxes 7,435 (64,269) 21,988 (49,434)
Income taxes(benefit) 2,534 (21,770) 8,251 (15,726)
-------- ------- ------- -------
Net earnings(loss) $ 4,901 $(42,499) $ 13,737 $(33,708)
======== ======= ======= =======
Preferred stock dividend
requirement $ (929) $ - $ (2,787)$ -
======== ======= ======= =======
Earnings(loss)applicable to
common stock $ 3,972 $(42,499) $ 10,950 $(33,708)
======== ======= ======= =======
Net earnings(loss)per common share
- Primary $ .22 $ (2.36) $ .60 $ (1.86)
- Fully diluted $ .22 $ (2.36) $ .60 $ (1.86)
======== ======= ======= =======
Dividends declared per share:
- Series 2 preferred stock $ 3.25 $ - $ 9.75 $ -
- Common stock $ .11 $ .11 $ .33 $ .33
======== ======= ======= =======
- 3 -
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 1. Financial Statements, continued:
Condensed Consolidated Statements of Cash Flows
(In thousands)
For the Nine Months
Ended September 30,
-------------------
1994 1993
--------- --------
Cash flows from operating activities:
Net earnings (loss) $ 13,737 $(33,708)
Depreciation and amortization 9,378 9,716
Restructuring and other costs - 69,500
Deferred income taxes (benefit) 1,284 (21,315)
Changes in current assets and liabilities (25,169) (36,167)
Other, net 812 (698)
-------- --------
Cash provided by (used in) operating
activities 42 (12,672)
-------- --------
Cash flows from investing activities:
Expenditures for property, plant & equipment (7,683) (18,395)
Other, net (786) (64)
------- --------
Cash provided by (used in) investing
activities (8,469) (18,459)
------- --------
Cash flows from financing activities:
Additions to notes payable 14,430 40,115
Additions (reductions) to long-term debt (286) (988)
Purchases of treasury stock (814) (3,520)
Dividends paid (8,789) (5,940)
Other, net 1,577 1,940
--------- ---------
Cash provided by (used in) financing
activities 6,118 31,607
--------- ---------
Net increase (decrease) in cash and
cash equivalents (2,309) 476
Cash and cash equivalents at beginning
of period 3,845 2,455
--------- ---------
Cash and cash equivalents at end of period $ 1,536 $ 2,931
========= ==========
- 4 -
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 1. Financial Statements, continued:
Notes to Condensed Consolidated Financial Statements
(In Thousands)
Basis of Presentation
- ---------------------
The December 31, 1993 condensed consolidated balance sheet
amounts have been derived from the previously audited consolidated
balance sheet of Kaman Corporation and subsidiaries.
The balance of the condensed financial information reflects all
adjustments which are, in the opinion of management, necessary for
a fair presentation of the financial position, results of
operations and cash flows for the interim periods presented and
are of a normal recurring nature unless otherwise disclosed in
this report.
The statements should be read in conjunction with the notes
to the consolidated financial statements included in Kaman
Corporation's 1993 Annual Report.
Cash Flow Items
- ---------------
Cash payments for interest were $3,606 and $7,129 for the nine
months ended September 30, 1994 and 1993, respectively. Cash
payments for income taxes for the comparable periods were $7,745
and $6,388, respectively.
- 5 -
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations
- ---------------------
Consolidated revenues were basically unchanged for the three month
and nine month periods ended September 30, 1994 compared to the
same periods of 1993. These results reflect the fact that
increases in Distribution segment sales were offset by lower
revenues in the Diversified Technologies segment.
Diversified Technologies revenues were down 19.3% and 9.8% for the
three month and nine month periods, respectively, compared to 1993,
as this segment's business continues to reflect the adverse
influence of conditions in the defense market and the commercial
aircraft industry.
Management expects that reductions in defense expenditures will
continue in future periods as a result of ongoing changes in U.S.
defense planning and spending priorities and fiscal pressures upon
the federal budget. Military hardware programs in particular are
subject to a variety of risks, including lack of funding, contract
cancellation, or program termination. The corporation has been
affected, principally with regard to its SH-2 helicopter program.
The corporation expects to finish its contract to retrofit certain
SH-2Fs to the SH-2G configuration this year and does not expect
that the U.S. Navy will have further retrofit requirements at this
time since it is reducing the size of the fleet. There is some
possibility that in the event the Navy provides retired ships to
foreign military services, an opportunity might exist for use of
the SH-2 for those purposes. At the present time, there are two
squadrons of SH-2 helicopters (i.e, a total of sixteen helicopters)
serving in the Naval reserves and no helicopters in active Naval
service. The corporation expects to continue to provide logistics
and spare parts support for the SH-2, but at lower levels than in
the past.
Within the defense market, emphasis appears to be shifting toward
the use of more cost effective advanced technology "smart" weapons
in order to limit loss of life and property during military
conflict. The corporation has significant expertise in this area,
having performed a multitude of government contracts for advanced
technology programs over the years. Management believes that the
corporation is well positioned to compete in a defense environment
that emphasizes advanced technology products and systems, as well
as advanced technology services such as computer software
development, intelligence analysis, and research and development.
- 6 -
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (cont.)
Even so, management recognizes that as the government continues to
focus on advanced technology programs in an environment where
overall defense expenditures are declining, competition for these
types of government contracts can be expected to increase.
The Diversified Technologies segment continues to perform work on a
number of commercial airframe manufacturing programs. However, the
level of commercial air travel and lack of profitability in the
domestic aircraft industry have caused a slowdown in aircraft
production rates which is continuing to affect the segment's
subcontract work.
The K-MAX(Registered Trademark)helicopter program is an important
component of the Diversified Technologies segment commercial
diversification efforts. The K-MAX(Registered Trademark)is a medium
to heavy lift 'aerial truck' helicopter with special operating
characteristics that distinguish it from other helicopters for use
in logging, fire fighting, and other utility applications. The
helicopter received FAA Type Certification (Part 27) on August 30,
1994. The first production lot of five (5) helicopters has been
completed and deliveries are being made to initial customers under
a special lease program that allows the corporation to maintain
active involvement in the product's introduction to the market-
place. The aircraft are being carried in inventory during the
period of this special lease program. The next production lot will
consist of six (6) helicopters for sale in 1995 to strategically
chosen customers in the United States and abroad. Although
management believes that this program has good potential in the
long term, the program is not expected to materially offset the
effects of reduced defense spending in the shorter term.
Distribution segment revenues were up 12.3% and 10.7% for the three
month and nine month periods of 1994, respectively, compared to a
year ago. These results are largely attributable to the industrial
distribution business, which comprises slightly more than 75% of
the Distribution segment. Industrial distribution sales are made
to nearly every sector of U.S. industry so demand for its products
tends to reflect industrial production levels and general economic
conditions. Continued improvement in the domestic economy has
contributed significantly to increased sales for our industrial
distribution operations. To some degree, these results also
reflect the effects of the company's value added systems marketing
strategy which has differentiated it from its competitors. Music
revenues were up for the three and nine month periods of 1994
compared to the same periods of 1993, reflecting improved
conditions in the U.S. economy and increases in foreign sales.
- 7 -
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (cont.)
For the three and nine month periods of 1994, the Diversified
Technologies segment had substantial increases in operating profits,
compared to the same periods of 1993. The increases are attributable
to the third quarter 1993 pre-tax restructuring charge of $69.5
million. That charge represented restructuring and other non-
recurring costs associated with defense conversion initiatives and
downsizing the defense and commercial aircraft manufacturing
businesses of the Diversified Technologies segment. If the
restructuring charge were disregarded, Diversified Technologies
operating profits for the three and nine month periods of 1994 would
have been down 12.2% and 13.3%, respectively, compared to the same
periods of 1993. These results reflect the ongoing effects of several
factors, including program reductions due to lower defense spending;
increased competition for the awarding of defense contracts which has
resulted in downward pressures on margins; increased research and
development costs for defense conversion programs, notably the K-MAX
(Registered Trademark) helicopter and for new military product
development; and a continuing shift in business mix from hardware
programs to research and development type products and services with
somewhat lower profit margins. Distribution segment operating profits
were up 51.4% and 24.6% for the three month and nine month periods,
respectively, compared to 1993. These results are primarily
attributable to the industrial technologies business and reflect
improvement in the domestic economic environment.
Interest expense for the first nine months of 1994 decreased 46.3%
compared to the same period of 1993. This reduction is largely a
result of the corporation's exchange of $61.8 million of its 6%
convertible subordinated debentures for $57.2 million of its preferred
stock during the fourth quarter of 1993.
The consolidated effective income tax rate for the first nine months
of 1994 was 37.5% and is somewhat lower than it would otherwise be due
to the corporation's receipt of a state tax credit. For the same
period of 1993, the corporation received an income tax benefit at an
overall rate of 31.8%. The income tax benefit was due to the
restructuring charge in the third quarter of 1993 and the resulting
loss for the first nine months of that year.
Net earnings were $4.9 million for the third quarter of 1994 compared
to a loss of $42.5 million a year ago. After giving effect to
preferred stock dividend requirements, earnings available to common
shareholders were $4.0 million compared to a loss of $42.5 million in
1993. Net earnings were $13.7 million for the first nine months of
1994 compared to a loss of $33.7 million a year ago. After giving
effect to preferred stock dividend requirements, earnings available
for common shareholders were $11.0 million compared to a loss of $33.7
million in 1993.
- 8 -
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (cont.)
Liquidity and Capital Resources
The corporation's cash flow from operations has generally been
sufficient to finance a significant portion of its working capital and
other capital requirements.
For general borrowing purposes, the corporation has maintained
revolving credit agreements involving several banks located in the
United States, Canada, and Europe. In July 1994, the corporation
entered into amended and restated revolving credit agreements which
replace the previous agreements and increase the corporation's maximum
unsecured line of credit from $145 million to $200 million. The
agreements each have a term of five years and contain provisions
permitting the term to be extended for additional one-year periods
upon concurrence of the parties. The agreements also contain various
covenants, including debt to capitalization and consolidated net worth
requirements. During the first nine months of 1994 there were no
borrowings under the agreements which were in effect during that
period.
The corporation also maintains other short-term credit arrangements
with various banks. As of September 30, 1994, these borrowings were
at $45.6 million. For the first nine months of 1994 average bank
borrowings against these short-term lines were $37.9 million compared
to $42.1 million for the same period of 1993.
In June, 1994, the corporation's board of directors authorized a
renewal ('the 1994 program') of the stock repurchase program which was
authorized in 1992 ('the 1992 program'). Under the 1994 program, the
corporation may repurchase up to 700,000 Class A shares in addition to
the shares remaining authorized under the 1992 program. As of
September 30, 1994, a total of 82,000 Class A shares had been
repurchased pursuant to the 1994 program. The primary purpose of the
stock repurchase program is to meet the needs of the Employees Stock
Purchase Plan and Stock Incentive Plan.
Management believes that the corporation's cash flow from operations
and available unused bank lines of credit under its revolving credit
agreements will be sufficient to finance its working capital and other
capital requirements for the foreseeable future.
- 9 -
KAMAN CORPORATION AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits to Form 10-Q:
(11) Earnings per common share computation
(27) Financial Data Schedule
(b) Reports on Form 8-K:
There have been no reports on Form 8-K filed during the
quarter ended September 30, 1994.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
KAMAN CORPORATION
Registrant
Date: November 11, 1994 By
Harvey S. Levenson
President
(Duly Authorized Officer)
Date: November 11, 1994 By
Robert M. Garneau
Senior Vice President and
Chief Financial Officer
- 10 -
KAMAN CORPORATION AND SUBSIDIARIES
Index to Exhibits
Page in Sequentially
Numbered Copy
--------------------
Exhibit 11 Earnings Per Common Share Computation 12
Exhibit 27 Financial Data Schedule 13
- 11 -
KAMAN CORPORATION AND SUBSIDIARIES
EXHIBIT 11 - EARNINGS PER COMMON SHARE COMPUTATION
(In thousands except per share amounts)
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
-------------------- ------------------
1994 1993 1994 1993
---- ---- ---- ----
Primary:
Net earnings (loss) applicable
to common stock $ 3,972 $(42,499) $ 10,950 $ (33,708)
======== ======== ======== =========
Weighted average number
of common shares outstanding 18,213 17,976 18,177 18,130
Weighted average shares
issuable on exercise of
dilutive stock options 80 * 91 *
-------- -------- ------- --------
Total 18,293 17,976 18,268 18,130
======== ======== ======= ========
Net earnings (loss) per common
share - primary $ .22 $ (2.36) $ .60 $ (1.86)
======== ======== ======= ========
Fully diluted:
Net earnings (loss)applicable
to common stock $ 3,972 $(42,499) $ 10,950 $(33,708)
Elimination of interest expense
on 6% subordinated convertible
debentures(net after taxes) 329 * * *
Elimination of preferred stock
dividend requirement 929 - * -
-------- -------- -------- --------
Net earnings (loss)(as adjusted) $ 5,230 $(42,499) $ 10,950 $(33,708)
======== ======== ======== ========
Weighted avg. no. of shares out-
standing including shares
issuable on exercise of
stock options 18,293 17,976 18,268 18,130
Shares issuable on conversion of
6% subordinated convertible
debentures 1,421 * * *
Shares issuable on conversion of
Series 2 preferred stock 4,552 - * -
Additional shares using ending
market price instead of average
market on treasury method use
of stock option proceeds 15 - * -
-------- -------- -------- --------
Total 24,281 17,976 18,268 18,130
======== ======== ======== ========
Net earnings (loss) per common
share - fully diluted $ .22 $ (2.36) $ .60 $ (1.86)
======== ======== ======== ========
* Anti-dilutive and accordingly not included in the computation
- 12 -
EXHIBIT 27
[ARTICLE] 5
[LEGEND]
The schedule contains summary financial information extracted from
the corporation's quarterly report to shareholders and is
qualified in its entirety by reference to such financial
statements.
[/LEGEND]
[MULTIPLIER] 1,000
[PERIOD-TYPE] 9-MOS
[FISCAL-YEAR-END] DEC-31-1994
[PERIOD-START] JAN-01-1994
[PERIOD-END] SEP-30-1994
[CASH] 1,536
[SECURITIES] 0
[RECEIVABLES] 157,606
[ALLOWANCES] (1,746)
[INVENTORY] 175,895
[CURRENT-ASSETS] 351,568
[PP&E] 182,595
[DEPRECIATION] (102,104)
[TOTAL-ASSETS] 472,434
[CURRENT-LIABILITIES] 192,896
[BONDS] 37,691
[COMMON] 18,268
[PREFERRED-MANDATORY] 0
[PREFERRED] 57,167
[OTHER-SE] 158,718
[TOTAL-LIABILITY-AND-EQUITY] 472,434
[SALES] 606,186
[TOTAL-REVENUES] 606,186
[CGS] 448,618
[TOTAL-COSTS] 580,552
[OTHER-EXPENSES] 546
[LOSS-PROVISION] 0
[INTEREST-EXPENSE] 3,100
[INCOME-PRETAX] 21,988
[INCOME-TAX] 8,251
[INCOME-CONTINUING] 13,737
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] 13,737
[EPS-PRIMARY] .60
[EPS-DILUTED] .60
-13-